Dimitry Afanasiev would like to get a few things straight. Russian president Vladimir Putin is not a dictator and not everyone with money in Russia is a crook. Fed up with what he sees as the West's -- and in particular America's -- media bias against Russia, the 38-year-old managing partner of Moscow's fast-rising Egorov Puginsky Afanasiev & Partners becomes animated.
"Ask anyone in Russia, from the average man in the street to the richest oligarch and they will tell you how much they are supporting what Putin is doing," he maintains, as proof of the Russian president's democratic credentials. The U.S. has taken its own shortcuts to the rule of law, Afanasiev points out. "Did a few noses get broken in the Wild West in the U.S.?" he asks. "Sure they did!"
As the head of a firm that is a regular adviser to Putin's government and one that counts Oleg Deripaska, one of Russia's richest oligarchs, as a client, Afanasiev has a few vested interests to declare. Since its creation in 1993, the 108-lawyer Egorov Puginsky has become one of a small band of independent Russian firms with some clout in the market, a standard-bearer alongside Moscow boutiques Pepeliaev, Goltsblat & Partners, Liniya Prava, and Andrey Gorodissky & Partners. Egorov Puginsky's association with Deripaska -- which began in 2003, just a few months after it represented the opposing side in an attempted hostile takeover -- has propelled the firm into the stratosphere of Russian dealmaking.
In a country where the top-end corporate and finance deals are still dominated by U.S. and U.K. law firms, Egorov Puginsky advised RUSAL, the aluminium giant owned by Deripaska, on its 2006 three-way merger with local competitor SUAL and the aluminium assets of Switzerland-based company Glencore International. RUSAL's multibillion-dollar initial public offering, expected at some point in 2008, will again feature Egorov Puginsky as counsel to the issuer, alongside international firms Ashurst and Cleary Gottlieb Steen & Hamilton.
To some in the market, Egorov Puginsky's rise can be explained by its talent for self-promotion and its close connections to the Russian Government. Name partner Nikolai Egorov is a former college classmate and, according to a 2001 Vanity Fair profile of Vladimir Putin, a friend of the Russian president. Name partner Boris Puginsky's son, Stanislaw Puginsky, a friend of Afanasiev, is a deputy head at Rosprom, the Russian federal agency that oversees more than 50,000 government-owned companies. And with a brand-new office in London, opened in April 2007, to go alongside the firm's established outposts in Moscow and St. Petersburg, Egorov Puginsky is becoming an increasingly prominent fixture on Russia's legal scene.
"We like to see ourselves as the Slaughter and May of Russia," Afanasiev proudly declares. That may be a tall order. But Egorov Puginsky personifies what it takes to succeed in Putin's modern, booming Russia: street savvy, well-chosen relationships, brash confidence and a keen understanding of the overlap between politics and business.
Despite some hard feelings towards the U.S. media, Afanasiev has well-established ties to the country, as the clear American lilt in his unbroken English suggests. Graduating in 1989 with a law degree from the University of Leningrad (now St. Petersburg State University), Afanasiev then studied law and government relations at the University of Pittsburgh's 'semester at sea' program and at the University of Pennsylvania. Jerome Shestack, then a litigation partner at Schnader Harrison Segal & Lewis in Philadelphia (and later president of the American Bar Association), hired Afanasiev first as a paralegal and then as an associate, to handle a mix of corporate and litigation work. Afanasiev followed Shestack to Philly rival Wolf, Block, Schorr and Solis-Cohen in 1991.
Part of the first generation from post-Soviet Russia to come of age professionally, Afanasiev quickly picked up Western rainmaking skills as well as a fierce work ethic. As Russia began to open up to foreign investment in the late 1980s and early 1990s, Afanasiev, then still in his early 20s, organized trips to Russia with Shestack to meet with prospective clients and government officials. "We made two visits to Russia and within no time we were representing [St. Petersburg mayor] Anatoly Sobchak and had met Vladimir Putin. And then we were appointed as a counsel to [the Russian president] Boris Yeltsin," recalls Shestack, now a counsel at Wolf Block and an adviser to Egorov Puginsky. Wolf Block counselled the St. Petersburg mayor on foreign economic projects and fundraising for architectural restoration, and the Russian Federation on creating a legal framework for international investment, Shestack says.
In one particularly high-profile case, Afanasiev helped free an Australian couple who had been kidnapped by Moscow gangsters and held for a $1.6 million ransom. Afanasiev worked through contacts made largely in Soviet student politics and a short stint in the Leningrad prosecutor's office. With the help of a Russian officer in the organized crime unit of the Ministry of Internal Affairs -- one of the successors to the Soviet KGB -- Afanasiev managed to get the Federal Bureau of Investigation and the new Russian secret services working together to win the release of the couple. "The old KGB and FBI were clearly very suspicious of each other, but he got them talking, and the story made the front page of The New York Times," Shestack recalls.
While Shestack developed an impressive stable of Russian government clients, Afanasiev knew that Wolf Block had no plans to invest in a Moscow or St. Petersburg office. But Afanasiev was reluctant to join an American firm with a Russian presence, such as Cleary Gottlieb Steen & Hamilton or Skadden, Arps, Slate, Meagher & Flom. "I am not the type who likes being an employee in a big firm," he says. "I would rather do things on my own."
At the end of 1993 he left Wolf Block -- but not the U.S. -- to enter into partnership with two older Russian lawyers, both of whom he knew from his student days: Nikolai Egorov was one of his old law professors from Leningrad University, and Boris Puginsky was a former deputy chief justice of Russia and the father of one of Afanasiev's student contemporaries in the 1980s. With Egorov heading the office in St. Petersburg and Puginsky in Moscow, Afanasiev opened a small office in Philadelphia, targeting both U.S. corporations investing in Russia and American law firms that needed a Russian firm to handle the Russian end of their deals.
U.S. firm Dechert soon became a lucrative source of work, handing Egorov Puginsky a role advising Marriott International on opening a string of hotels in Russia. The U.S. firm also turned to Egorov Puginsky to act as the Russian legal adviser to investment firm Franklin Templeton when it established one of the first mutual funds investing in Russian companies.
Keen to build on Afanasiev's experience in the U.S., the three partners aimed to build a distinct local practice. "We wanted to establish a firm on a U.S. model," Afanasiev explains. "Not just writing memos for clients in English saying Russia was impossible, but providing real answers to clients' problems while also following a higher standard of ethics along European and U.S. lines."
While Afanasiev contributed his U.S. experience and, he says, a vision for the firm, the two name partners brought immediate stature. "There is a cadre of Russian judges and government lawyers coming out of the top law schools who know my partners," Afanasiev says, "so we have the benefit of at least being heard out of respect for my two partners. It does not guarantee a positive outcome for our clients, but it gets us in the door."
Today, with Egorov shy of the press and the 66-year-old Puginsky cutting back on his work, Afanasiev is very much the public face of the firm.
Afanasiev returned to Moscow full time in 1999, handing the running of the Philadelphia office to new partner Bruce Marks, a former litigation partner at Spector Gadon & Rosen. The arrangement did not last long, however. The Philadelphia office was spun off in 2001 following what Afanasiev describes as "a difference of opinion."
Says Marks: "We had differences. Some people only stay married for a short time." Together with former Egorov Puginsky associate Sergei Sokolov, Marks formed Marks & Sokolov, which now has offices in Philadelphia, Moscow and Kiev. Marks' firm has made its name representing a number of Russian clients in litigation against high-profile targets -- including Egorov Puginsky client Deripaska, the aluminum tycoon.
Although work for major corporations remains Egorov Puginsky's principal focus, advice to the government has raised its profile in the Russian and international press. In 2004 the firm acted for the state in negotiating the release of three Russian fishing vessels and their crew, arrested off the coast of Mauritania over an alleged debt of $13 million. The debt proved to be based on forged documents, and together with the Russian authorities, Egorov Puginsky first secured the release of the ships and the crew, then the July 2007 extradition to Russia of the Mauritanian behind the seizure.
But not all of the cases in which Egorov Puginsky has advised the Russian Government have ended as successfully. In 2004 the firm was called in by the Ministry of Foreign Affairs to handle another overseas case, this time involving a Russian diplomat and two Russian intelligence agents arrested in Qatar for the assassination of Zelimkhan Yandarbiyev, a separatist leader from the Russian region of Chechnya who was murdered in Doha, the Qatari capital.
The diplomat was released, but the two agents, members of the Russian intelligence agency GRU, stood trial in Qatar and were given life sentences in June 2004. Outside the courtroom, it was Afanasiev, as Russia's lead lawyer, who faced the world's press alongside Russia's local Qatari counsel. Despite the guilty verdicts and bad publicity — the New York Times described the case as "a diplomatic and political embarrassment for the Kremlin" -- Afanasiev calls the outcome positive. "We avoided the death penalty and negotiated the subsequent transfer of the individuals to Russia, which was successfully completed in the same year," he says.
The press coverage of the Yandarbiyev assassination is a prime example of the sort of media report that makes Afanasiev bristle. "Media people often take the worst stories on Russia and miss the good ones," he protests.
As head of a firm that is closely associated with the Russian government, Afanasiev complains more ardently about Russia's treatment in the press than most Moscow lawyers. Although Egorov Puginsky counts as clients Cisco Systems, Radisson Hotels & Resorts and Franklin Templeton's Templeton Worldwide, invariably the firm's connections to Putin and Deripaska attract the most attention.
Deripaska is still a controversial figure to some in the West. He emerged in the late 1990s during a period now known as the Aluminum Wars, when key Russian metals, energy and manufacturing assets regularly switched hands among a cast of local businessmen and international investors. From this trading of assets, Deripaska built the largest stake in RUSAL, an aluminum giant with global ambitions.
But Deripaska has been accused of using questionable methods in the past. A racketeering suit filed in the U.S. district court in New York in 2000 by the former owners and managers of the Novokuznetsk aluminum smelter accused Deripaska of making a death threat against Yuri Zhivilo, brother of the former owner of the smelter. RUSAL denied the allegations. After the suit was dismissed by the U.S. courts on jurisdictional grounds, Zhivilo and his brother Mikhail Zhivilo settled their claims against RUSAL and Deripaska for an undisclosed sum. In 2006 the State Department asked Deripaska not to travel to the U.S. and subsequently revoked his visa. (The State Department declines to comment on individual visa cases.)
Afanasiev declined to discuss the Zhivilo litigation against Deripaska. He first crossed paths with the aluminum magnate in 2000 when Egorov Puginsky acted for a client on a claim against Deripaska, then again in 2002 when the firm was one of several, including Coudert Brothers, defending Ilim Pulp against a hostile takeover by one of Deripaska's companies.
According to former Coudert lawyer Derek Bloom, now a partner at Washington, D.C.'s Galland, Kharasch, Greenberg, Fellman & Swirsky, Afanasiev's firm handled defense-related litigation in St. Petersburg on behalf of Ilim Pulp. However, Bloom recalls, when the litigation was at the appeals stage, Egorov Puginsky withdrew from the case. The firm, says Bloom, "was subsequently known to be working for companies involved in the attack on Ilim Pulp."
Afanasiev says the firm withdrew because its terms of engagement had ended. "We had a written flat-fee agreement with Ilim that had an expiration date, and we ceased acting for Ilim when our fee arrangement expired," he says. "By that time we had accomplished the objectives for which we were engaged by the client, as a result of which the takeover 'blitzkrieg' was derailed." Ilim Pulp eventually succeeded in repelling the Deripaska takeover attempt -- making the case something of a milestone in Russian M&A.
Afanasiev, along with Ashurst, advised Deripaska in 2006 when he entered into a transformational three-way merger with Russian rival SUAL and the aluminum assets of Swiss company Glencore. Deripaska, who emerged as the largest shareholder in RUSAL, established the company as the largest aluminum producer in the world. Although the deal was largely governed by English law, Russian law covered a significant element concerning due diligence and various Russian subsidiary companies.
"Dimitry was not just sitting on the sidelines, advising on the Russian part of the deal," says Andrew Edge, the lead partner at RUSAL's English adviser, Ashurst. "He was heavily involved on the international side, particularly on commercial issues. He played the role of counsel to the company as well as his team providing local law advice."
In April 2007 Afanasiev was appointed to the board of directors of RUSAL, a clear confirmation of his standing with Deripaska. "They are obviously very close," adds one lawyer who has seen Afanasiev and Deripaska together. RUSAL's plans to list 25 percent of the company on the London Stock Exchange were put on hold in September 2007, reportedly over concerns about the credit crunch. When it does happen it should be one of the largest floats of any year -- the company reportedly hoped to raise $7.5 billion before its initial plans were shelved -- with Egorov Puginsky slated to advise on the listing alongside Ashurst and Cleary Gottlieb Steen & Hamilton.
Afanasiev mounts a stout case for his client as a champion of Russian industry. "Unlike some Russian oligarchs who buy football clubs in England," says Afanasiev, with a thinly veiled dig at Chelsea football club owner Roman Abramovich, "Deripaska recognizes that Russia has been lagging behind the West in key manufacturing sectors such as cars and construction, and he is spending his money on buying and bringing home to Russia these key technologies from the West to help modernize Russian economy and turn a profit at the same time."
Deripaska has taken key stakes in multinationals such as Canadian car parts maker Magna and European construction company Strabag SE. According to Afanasiev, his aim is simple: to use western expertise for the benefit of Basic Element's various industrial businesses, thus delivering Russia an up-to-date manufacturing base. Through each of these deals Egorov Puginsky has been a constant, advising alongside various international firms, including Cravath, Swaine & Moore and Bryan Cave.
As a firm run by Russians, Egorov Puginsky likes to claim it has a recruiting edge on the international firms that handle most of the country's high-level dealmaking. Although the firm was built with lateral hires, it has recently begun to hire new law graduates. And while legal talent remains in short supply in Russia's hectic hiring market, Egorov Puginsky can cast its net more broadly than U.S. and U.K. firms. "We go for the guy who does not necessarily speak English, [who] works hard and is a good lawyer in the eyes of our professors," says Afanasiev. There is also the issue of Russian autonomy. "We can offer people the chance to become a co-owner of a leading Russian independent firm," Afanasiev says. "At a U.S. firm, even if you become a partner your future is still determined in a New York boardroom."
At Egorov Puginsky, the firm's 15 senior associates receive an equity share that is based on the billings of the younger lawyers they oversee. Above them are three junior partners and four equity partners: Afanasiev, Egorov, St. Petersburg office head Ilya Nikiforov and Ednan Egaev, a former Russian minister and a diplomat. (Having reduced his workload, Puginsky is now counsel at the firm.) "We cannot pay first-year lawyers $160,000, but we can hire them after a few years at a U.S. firm and give them a cut of profits so our sixth-year lawyer can make more than he would at a U.S. firm," explains Afanasiev. He refuses to specify what those profits amount to or what the firm's revenues are.
U.S. and U.K. rivals in Moscow insist that despite Egorov Puginsky's recent corporate track record, there is a gap between Russian and international firms in the type of work and level of expertise that the firms can provide. "Firms like Freshfields are rendering different services," says Freshfields Bruckhaus Deringer Moscow head Jacky Baudon. "Russian firms do not have the same English precedents or level of sophistication. They tend to be very different."
The most prominent local firms tend to have strength in a particular practice area, such as Pepeliaev Goltsblat & Partners in tax, Liniya Prava in capital markets, Andrey Gorodissky & Partners in intellectual property and Monastyrsky, Zyuba, Stepanov & Partners in litigation. But with many of the top-end corporate finance deals governed by English or -- to a lesser degree -- New York law, and with major Russian companies still looking to list in London or New York, the foreign firms have a clear advantage.
Nevertheless, Egorov Puginsky's growth is on the upswing, its headcount rising 15 percent to 20 percent each year over the past decade. Recognizing London's importance to Russian businesses interested in tapping the international capital markets, Egorov Puginsky opened a small outpost there in 2007. So far the London outpost is essentially a one-man operation, staffed by counsel Allen Thomas, a former Paul, Weiss, Rifkind, Wharton & Garrison partner who left the firm in 1992 for a business career that included stints as director of U.K. computer game company Eidos Interactive and chairman of insurer Ockham Holdings. Afanasiev makes frequent trips from Moscow, and Thomas says that the firm is on the lookout for partner-level lateral hires.
A return to the U.S. is the next logical step in the firm's international development. Opening in New York or Washington, D.C., is more likely than a return to Philadelphia. "If we found the right partner in Washington, I could see us becoming the predominant public policy group specializing in U.S.-Russia issues," Afanasiev says. Lobbying to soften Putin's reputation in D.C. or to secure a new visa for Deripaska would make a good first assignment.
Editor's note: This story appears in a Legal Week supplement and the "Focus Europe" supplement to The American Lawyer.